The Footprint of Growth: A Multi-Faceted Environmental Kuznets Curve Analysis of Co2 Emissions in the U.S.

Abstract

Using state-level panel data, I revisit literature on the likelihood of an Environmental Kuznets Curve (EKC) relationship among U.S. states with respect to carbon dioxide emissions. Using panel corrected standard errors to correct for nonspherical error structure, energy intensity, carbon intensity, and electricity trade effects are regressed upon appropriate sets of explanatory variables. Parameter estimates are incorporated into a calculation of total income elasticity of per capita CO2 emissions, using decomposition analysis inspired by the Kaya equation. I find that econometric flaws in some of the models have skewed the results of prior studies in the form of unrealistically high-income thresholds at which income elasticity turns negative. I find evidence of an EKC curve with respect to trade-adjusted per capita emissions when correcting for these problems. This paper contributes new analysis in the form of newer data, better-defined resource endowment variables, inclusion of demographic variables and, most importantly, an acknowledgment of possible structural change between two time periods, with the transition occurring in the mid- to latenineties. Evidence of structural change was found and attributed to a variety of factors, including regional shifts with regard to institutional arrangements concerning the North American Electric Reliability Corporation (NERC) region boundaries, new electricity regulation in the 1990s, and a change in GDP data methodology reported by the Bureau of Economic Analysis (BEA). It is recommended that future studies provide more detail with regard to this structural change and more closely account for complex policy scenarios such as renewable portfolio standards (RPS).